Put Options Soar as Earnings Sink Cliffs Natural Resources Inc (CLF)

In the wake of earnings, Cliffs Natural Resources Inc (CLF) has landed on the short-sale restricted list

by Alex Eppstein

Published on Oct 27, 2016 at 10:53 AM

Cliffs Natural Resources Inc (NYSE:CLF) is taking it on the chin this morning due to a poorly received earnings report. At last check, the mining stock has stumbled 16.3% at $5.19, landing it on the short-sale restricted list. Meanwhile, both CLF shares and options are trading at a breakneck pace.

For starters, intraday stock volume sits just 1 percentage point from a 12-month high, with more than 13 million shares exchanged. On a similar note, CLF put options are running in the 99th percentile of their annual range, and at seven times the usual intraday rate. Short-term put traders have set their sights on the now in-the-money 5.50 strike, which accounts for the top two positions -- in the weekly 10/28 and 11/4 series.

Longer term, however, Cliffs options buyers have been keying in on calls over puts. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 3.58 calls for every put during the past two weeks. The corresponding call/put volume ratio ranks in the top one-third of all readings recorded in the previous year.

This doesn't mean all of the call buyers are bullish, though. With roughly one-third of CLF's float sold short -- which would take 8.5 sessions to cover, at the stock's average trading rate -- it's possible short sellers have been hedging their bearish positions via protective calls.

Technically speaking, Cliffs Natural Resources Inc (NYSE:CLF) is still in excellent shape, in spite of this morning's steep setback. Year-to-date, the shares have surged over 228%. Not to mention, CLF stock is approaching a key technical area in the $5-$5.50 neighborhood, which has contained multiple pullbacks in recent months after previously serving as resistance.

clf daily october 27

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